Canada; its Defences, Condition, and Resources / Being a third and concluding volume of "My Diary, North and South"

by Sir William Howard Russell

If the gentlemen who composed the elaborate Report, bristling all over with generous sentiments and with the expression of the most enlightened and liberal doctrines, could blush, they might well perform that interesting operation when reading Mr. Galt’s reply. Canada admits the registration of foreign vessels without charge; the United States do not. Canada has sought admission to the great lakes for coasters; the United States refuse. Canada allows American vessels to pass free through her canals; not a Canadian vessel is allowed, even on payment of toll, to enter an American canal. The promise in the treaty, that the Government of Washington would urge on the States the concession of a right to navigate their canals on equal terms with American subjects, has not been kept; at least, there is no trace of any effort having been made to induce the State Legislatures to relax their present extreme policy, which is in strong contrast with the professions of their Committee-men. Canada permits foreign goods bought in the United States to be imported on the payment of duty on the original invoice; the United States will not permit similar purchases to be made in Canada. Tea imported from Canada is weighted with duty of ten per cent., while the duties under the Canadian tariff are very much lower than those levied in America. The permission to pass goods under bond through the States conferred an obvious advantage on American railroads; but, indeed, the Committee were fain to admit that the United States had not established a fair reciprocity, inasmuch as they recommend that reciprocity should be made complete. Duties have been imposed in the United States for purposes of Protection, and they can scarcely bring accusations against Canada until they have established a system of duties as low as those of Canada. The ad valorem system of Canada, against which the Committee protest, is the system of the United States; for tea and sugar there is a discriminating duty in favour of American vessels of twenty per cent. Duty is levied in Canada solely for purposes of revenue: and though this policy, which has led the late Minister and his predecessors to reduce tolls and customs-dues to a minimum, has alarmed the canal and ship-owners and railway-directors of New York, it is viewed with approbation by the great Western States.

“It is,” says Mr. Galt, “a singular charge to make of discrimination on our part against them, that we do not permit one section of our public works to be used for purposes exclusively beneficial to them, when they absolutely, and contrary to the engagements of the treaty, debar any Canadian vessel from entering their waters, if we except Lake Michigan, specially mentioned in the treaty. Surely Canada does enough for them when she places them precisely on the same footing as she does her own vessels; and it is a novel doctrine that because the whole St. Lawrence is made free, therefore an injury is done to the New York route. The remedy is simple, and in their own hands: let them do as Canada has done—repeal the tolls on their canals, and admit Canadian vessels to ply upon them—and then the desired state of ‘fair competition’ will have arisen. But the Committee must have formed but a low estimate of the intelligence of their own people in the West, when they make it a subject of complaint against Canada that she has opened the St. Lawrence freely to their trade. The undersigned apprehends that the inhabitants of those great States will be much more likely to demand from their own Government an equitable application of their own customs-laws, so as to permit them to import direct viâ the St. Lawrence, and to buy in the Canadian market, rather than to join with the Committee in requiring a return to a system by which the entire West has hitherto been held in vassalage to the State of New York.”

Mr. Galt argues that an increase of customs-duties does not, necessarily, injuriously affect foreign trade within certain limits, and that those limits have not been exceeded in Canada. Formerly the cost of British goods in Canada was much enhanced, owing to natural causes, whilst Canadian producers obtained a minimum price for their exports. The duty was then generally 2½ per cent., but the price was enormous; and the Canadian suffered, pro tanto, in his means to purchase them. Suppose the duties, increased five per cent., were to produce a reduction of ten per cent. on other charges, “the benefit,” says Mr. Galt, “would accrue equally to the British manufacturer and to the consumer; the consumer would pay five per cent. more to the Government, but ten per cent. less to the merchant and forwarder.” As Mr. Galt considers the principle of Canadian finance and customs to be misapprehended in England as well as in the United States, it may be as well to give his own words:—

“The Government has increased the duties for the purpose of enabling them to meet the interest on the public works necessary to reduce all the various charges upon the imports and exports of the country. Lighthouses have been built, and steamships subsidised, to reduce the charges for freight and insurance; the St. Lawrence has been deepened, and the canals constructed, to reduce the cost of inland navigation to a minimum; railways have been assisted, to give speed, safety, and permanency to trade interrupted by the severity of winter. All these improvements have been undertaken with the twofold object of diminishing the cost to the consumer of what he imports, and of increasing the net result of the labour of the country when finally realised in Great Britain. These great improvements could not be effected without large outlays; and the burthen necessarily had to be put either through direct taxation, or by customs-duties on the goods imported, or upon the trade by excessive tolls corresponding with the rates previously charged. Direct taxation was the medium employed, through the local municipalities, for the construction of all minor local works—roads, court-houses and gaols, education, and the vast variety of objects required in a newly-settled country; and this source of taxation has thus been used to the full extent which is believed practicable without producing serious discontent. No one can, for a moment, argue that, in an enlightened age, any Government could adopt such a clumsy mode of raising money as to maintain excessive rates of tolls; nor would it have attained the object, as American channels of trade were created simultaneously, that would then have defied competition. The only effect, therefore, of attempting such course would have been to give the United States the complete control of our markets, and virtually to exclude British goods. The only other course was therefore adopted, and the producer has been required to pay, through increased customs-duties, for the vastly greater deductions he secured through the improvements referred to. What, then, has been the result to the British manufacturer? His goods are, it is true, in many cases subjected to 20 per cent. instead of 2½ per cent., but the cost to the consumer has been diminished in a very much greater degree; and the aggregate of cost, original price, duty, freight, and charges are now very much less than when the duty was 2½ per cent., and consequently the legitimate protection to the home-manufacturer is to this extent diminished. Nor is this all: the interest of the British manufacturer is not merely that he shall be able to lay down his goods at the least cost to the consumer, but equally is he interested in the ability of the consumer to buy. Now, this latter point is attained precisely through the same means which have cheapened the goods. The produce of Canada is now increased in value exactly in proportion to the saving on the cost of delivering it in the market of consumption.

“If the aggregate of cost to the consumer remained the same now as it was before the era of canals and railroads in Canada, what possible difference would it make to the British manufacturers whether the excess over the cost in Great Britain were paid to the Government or to merchants and forwarders? It would certainly not in any way affect the question of the protection to home-manufacturers: but when it can be clearly shown that by the action of the Government, in raising funds through increased customs-duties, the cost to the consumer is now very much less, upon what ground can the British manufacturer complain that these duties have been restrictive on his trade?

“The undersigned might truly point to the rapid increase in the population and wealth of Canada, arising from its policy of improvement, whereby its ability of consumption has been so largely increased. He might also show that these improvements have, in a great degree, also tended to the rapid advance of the Western States, and to their increased ability to purchase British goods. He might point to the fact that the grain supplied from the Western States and Canada keeps down prices in Great Britain, and therefore enables the British manufacturer to produce still cheaper. But he prefers resting his case, as to the propriety of imposing increased customs-duties, solely on the one point, that through that increase the cost of British manufactured goods, including duty, has been reduced to the Canadian consumer, and that consequently the increase has in its results, viewing the whole trade, tended to an augmentation of the market for British goods.”

In a tabular statement it is shown that the average amount of duty levied on imports from the United States in 1861 is the same as the average of the previous twelve years, that the variations have been very slight, and that the rate per cent. was less than half what it had been a few years before, whilst American trade has been steadily increasing. Under the operation of the treaty, the imports from the United States, in 1861, were nearly trebled, and the exports from Canada to the United States were nearly quadrupled; the whole amount of trade in 1851 being, in round numbers, 12,500,000 dollars, which was increased to 24,000,000 dollars in 1854, and to 35,500,000 dollars in 1861. These advantages may be still further extended without injury to either nation or to the just claims of Great Britain to an equality in the Canadian market; and Mr. Galt professed himself quite ready for the abolition of the coasting laws on inland waters—of all discrimination as to nationality in respect of vessels—the free import of wooden wares, agricultural implements, machinery, and books—the assimilation of the patent-laws: but he totally opposes the project of a Zollverein, on the ground that it would be inconsistent with the maintenance of connexion with Great Britain, inasmuch as Canada would be called upon to tax goods of British manufacture, while she admitted those of the United States free.

“Great Britain is,” he observes, “the market for Canadian produce to a far greater extent than the United States.” The United States would necessarily impose her views on the Zollverein, and “the result would be,” says Mr. Galt, “a tariff not, as now, based on the simple wants of Canada, but upon those of a country engaged in a colossal war.” It must be regretted, notwithstanding Mr. Galt’s arguments, that the Canadian tariff is so high; but if she be called upon to incur a fresh debt for the purposes of defence, it is more likely that it will be increased rather than diminished. In connection with the relations of Canada and the West to the United States, the opening of new water-ways and roads becomes of paramount interest and importance.